This morning Delta Financial Corp. laid off 470 of its remaining 1,000 employees as waning loan production and credit concerns continued to weigh on the struggling mortgage lender.
“While it was our expectation that the reduction in force we experienced this past August would be sufficient to sustain our business through what is a global credit crisis…the recent and unexpected turmoil in the subprime and securitization sectors is having a further and significant adverse impact on our business,” chief executive Hugh Miller wrote in an e-mail to employees.
“Please understand that there are no viable alternatives to today’s actions. We must take these drastic measures to respond to unexpected and drastic times.”
Fidelity Mortgage Going Down with the Ship
Miller noted that Fidelity Mortgage, a wholly owned subsidiary of Delta Financial Corp., would be affected as well, with one source claiming that offices in Chicago and Arizona would be shut down as a result.
The lender expects to see a restructuring charge of approximately $7.5 million, of which about $1.4 million will be paid immediately in severance as a result of the layoffs.
Following the layoffs, the New York based lender announced a third-quarter net loss of $39.6 million, or $1.70 per diluted share, compared to net income of $8 million, or $0.33 per share a year ago.
Delta’s loan origination volume decreased to $809 million during the third quarter of 2007, roughly 19% lower than production numbers from the third quarter of 2006.
The layoffs are the latest bit of bad news to hit the lender, which suffered 300 jobs cuts in August and recently suspended its dividend.
Shares of Delta Financial Corp. ended the regular session down $0.54, or 14.67%, to $3.14, but were rocked by the news in after hours trading, falling a further 36.31%.
Delta Financial Halts Lending, Will File BK
Update: Delta Financial has stopped accepting new loan applications and will file for bankruptcy protection.
The Woodbury, Connecticut-based mortgage lender said it was unable to complete a previously announced deal for much needed financing from Manhattan-based Angelo, Gordon & Co.
“The company has been unable to complete such a securitization transaction upon satisfactory terms. In light of the foregoing, the company does not expect to be able to consummate the…transaction with Angelo, Gordon. Furthermore, the company does not believe that it will be able to continue as a going concern,” Delta said in an announcement.
Delta intends to file for bankruptcy protection shortly and will “continue to operate its business as a ‘debtor in possession” under the bankruptcy code.
It is believed that more employees have been let go today as a result of the news, though the company would not comment on the situation.
Shares of Delta Financial nosedived in afternoon trading Thursday, falling $1.50, or 88.24%, to a mere 20 cents.
Based on that trading price, Delta Financial now has a market cap of only $4.72 million.
Check out the latest list of closed lenders, mortgage layoffs and mergers.